Commonwealth of Australia Explanatory Memoranda

[Index] [Search] [Download] [Bill] [Help]

TREASURY LAWS AMENDMENT (ENTERPRISE TAX PLAN BASE RATE ENTITIES) BILL 2018

                               2016-2017-2018



    THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA




                     HOUSE OF REPRESENTATIVES




TREASURY LAWS AMENDMENT (ENTERPRISE TAX PLAN BASE RATE
                  ENTITIES) BILL 2017




          SUPPLEMENTARY EXPLANATORY MEMORANDUM



            Amendments to be moved on behalf of the Government



                         (Circulated by authority of the
Minister for Revenue and Financial Services, Minister for Women and Minister
Assisting the Prime Minister for the Public Service, the Hon Kelly O'Dwyer MP)
Table of contents
General outline and financial impact ...................................................... 5

Chapter 1            Amendments to Treasury Laws Amendment
                     (Enterprise Tax Plan Base Rate Entities) Bill
                     2017............................................................................. 7
General outline and financial impact

Amendments to Treasury Laws Amendment (Enterprise Tax
Plan Base Rate Entities) Bill 2017
        The amendments to Treasury Laws Amendment (Enterprise Tax Plan
        Base Rate Entities) Bill 2017 will ensure that interest income that is
        derived by a corporate tax entity is taken to be passive income for the
        purposes of determining whether it qualifies for the lower corporate tax
        rate.
        Date of effect: Treasury Laws Amendment (Enterprise Tax Plan Base
        Rate Entities) Bill 2017 applies from the 2017-18 income year.
        Proposal announced: Not previously announced.
        Financial impact: Nil.




                                                                                   5
Chapter 1
Amendments to Treasury Laws
Amendment (Enterprise Tax Plan Base
Rate Entities) Bill 2017

Outline of chapter
         1.1        The amendments to Treasury Laws Amendment (Enterprise Tax
         Plan Base Rate Entities) Bill 2017 will clarify the circumstances in which
         interest income is taken to be passive income for the purposes of
         determining whether a corporate tax entity qualifies for the lower
         corporate tax rate.


Detailed explanation of new law
         1.2       Amendment 1 will modify section 23AB of the Income Tax
         Rates Act 1986 to clarify the circumstances in which interest income is
         taken to be passive income for the purposes of determining whether a
         corporate tax entity qualifies for the lower corporate tax rate.
         1.3      The amendment clarifies that an amount of interest (or a
         payment in the nature of interest) derived by an entity will be passive
         income unless:
                  •  the entity is a financial institution (as defined in section 202A
                    of the Income Tax Assessment Act 1936) -- a financial
                    institution is defined in section 202A to include a bank (such
                    as an authorised deposit-taking institution) and a co-operative
                    housing society;
                  •  the entity is a registered entity within the meaning of the
                    Financial Sector (Collection of Data) Act 2001 that carries
                    on a general business of providing finance (within the
                    meaning of that Act) on a commercial basis;
                  •  the entity holds an Australian credit licence (within the
                    meaning of the National Consumer Credit Protection Act
                    2009), or is a credit representative (within the meaning of
                    that Act) of another entity that holds an Australian credit
                    licence;
                  •  the entity is a financial services licensee (within the meaning
                    of the Corporations Act 2001) whose licence covers dealings


                                                                                   7
                 in financial products mentioned in paragraph 764A(1A)(a) of
                 that Act, or is an authorised representative (within the
                 meaning of section 761A of that Act) of such a financial
                 services licensee -- paragraph 764A(1A)(a) covers financial
                 products that are securities; or
             •  the entity is an entity of a kind mentioned in a legislative
               instrument made by the Minister under subsection 23AB(3).
    1.4      In this regard, a legislative instrument made by the Minister
    under subsection 23AB(3) is a disallowable instrument. The legislative
    instrument making power will allow the scope of paragraph 23AB(2)(a) to
    be expanded so that it covers other entities that are actively carrying on
    commercial money lending business if necessary.
    1.5       The amendment also confirms that an amount that is a return on
    an equity interest in a company is not taken to be interest (or a payment in
    the nature of interest).




8